Trustee Compensation in 2025: Determining Reasonable Fees

Acting as a trustee involves juggling investments, paying bills, filing tax returns, communicating with beneficiaries, and sometimes refereeing family disputes. Courts and statutes recognize that this work takes time and skill; trustees are not expected to serve without compensation. Many trust instruments simply state that a trustee is entitled to “reasonable compensation.” In California, for example, Probate Code § 15681 codifies the right to a reasonable fee.

Factors courts consider

Because few trusts specify an exact fee schedule, courts look at multiple factors when asked to determine reasonableness. The Judicial Council’s Rule 7.776 (followed by many states) lists elements such as:

• Gross income and size of the trust estate—Larger trusts typically warrant higher compensation because administration is more complex and time‑consuming.

• Success of administration and trustee’s fidelity—Courts reward trustees who prudently manage assets, avoid conflicts of interest, and achieve the trust’s objectives.

• Skill and experience required—A trustee with professional expertise (legal, financial, or managerial) may receive more, especially if the trust holds closely held businesses, real estate, or other complex assets.

• Time spent and degree of risk—Detailed record keeping is essential. A trustee who can show hours devoted to tax filings, property management, and beneficiary communications is more likely to justify a higher fee. Conversely, a trustee who delegates most tasks should not collect an outsized payment.

Community practice matters too. In many jurisdictions, a fee of about 1 % of the trust’s annual value is considered reasonable, though rates vary depending on the trust’s nature and local custom.

Recent developments: Maryland’s 2025 update

While most states rely on longstanding reasonableness standards, some legislatures are refining compensation rules. In Maryland, the General Assembly passed legislation in 2025 allowing guardians of property and trustees to set fees that reflect reasonable compensation rather than fixed schedules. The law, effective October 1 2025, gives trustees greater flexibility to charge for their work while preserving oversight to prevent abuse. The statute also streamlines trustee resignation procedures and clarifies duties under the Maryland Trust Act. These changes signal a broader trend toward modernizing trust law and aligning compensation with the complexities of modern administration.

Best practices for setting and justifying fees

1. Check the trust document first.  Some trusts specify a fee schedule or require court approval for compensation. Follow those provisions unless they conflict with state law.

2. Keep meticulous records.  Document time spent on tasks, expenses incurred, and professional services retained. Clear records provide evidence of the effort involved and help prevent disputes.

3. Communicate with beneficiaries.  Transparency builds trust. Notify beneficiaries when you intend to take a fee, explain how it was calculated, and provide an opportunity for questions or objections.

4. Consider hiring a professional.  If trust administration requires specialized knowledge—such as managing a business or handling complex tax issues—hire professionals and charge the trust for their fees. A trustee who recognizes their limits and seeks help is fulfilling the duty of prudence.

5. Stay current on state law.  Legislative updates like Maryland’s 2025 reform demonstrate that compensation rules evolve. Consult with legal counsel to ensure your fee practices remain compliant.

Striking the right balance

Reasonable compensation ensures trustees are rewarded for their time and expertise while protecting beneficiaries from overcharging. By adhering to statutory guidelines, keeping thorough records, and communicating openly, trustees can justify their fees and avoid litigation. As trust administration grows more complex—with digital assets, changing tax laws, and evolving family structures—well‑documented, reasonable compensation is not just fair; it’s essential for attracting qualified fiduciaries and maintaining trust integrity.